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A few years back, many people thought that by now everyone would pay for soft drinks by waving a cellphone at a vending machine. In reality, mobile commerce, or m-commerce, has been slow to get started.

Things looked promising in 2003 when a group of operators including Orange, Vodafone, and T-Mobile formed Simpay, a Europe-wide consortium that would have allowed mobile users to charge goods and services to their mobile phone bills. This fell apart after T-Mobile dropped out.

Operators are still trying to make m-commerce work, however.

Transactions mainly focus on micro payments (high volume, low value transactions) rather than macro payments (lower volume payments for larger amounts).

The popular way of fulfilling these payments has been premium rate SMS, where users receive an SMS message costing about £1.50. However, SMS was not designed for this, and many consider it inefficient.

Jeremy Flynn, who runs the content side of Vodafone’s business, wants to provide a standard way for people to make purchases with their mobile phones. Vodafone and Orange started a successor to Simpay, called XPay, now rebranded PayForIt.

Rather than clearing payments, it acts as a standard interface for merchants to arrange payments, which are then processed with payment systems such as Vodafone’s m-pay, which bills the customer’s account.

But with operators routinely charging at least a 20 per cent margin on an m-commerce transaction, some companies are unwilling to participate.

Verrus, which provides mobile phone-based parking meter payments, uses credit card transactions triggered by a mobile phone. Customers use their phone to send the parking meter’s code to Verrus, which then registers the payment and bills their card through a customer account. And this all happens outside the telephone operator’s billing system.

“For us it has to go to a credit or debit card, because it’s too expensive to do premium rate SMS,” says UK MD Robin Bevan, who adds that there is no cost-effective way to charge payments to mobile phone accounts either. “Where motorists get billed is in the most cost-effective place. Right now that’s via the credit card.”

Monilink, which will launch later this year, will also concentrate on using the phone as a way to control other payment mechanisms, rather than using the phone bill itself as a way to pay for goods and services.

Monilink will enable banks to offer internet banking functions such as account balances and mobile phone account top-ups.

Co-founder Alastair Lukies imagines that users will also eventually be able to transfer money between each other’s bank accounts using their mobile phones. “The mobile phone will be the remote control for our lives,” he says. “But it’s the remote control, not the TV. The payment device might remain the card in your pocket or the cash in your wallet.”

But how does the phone become a remote control?

Lukies sees a future when radio frequency identification chips in phones could control access to ticket barriers. For example, an automatic payment system could be on a chip in a phone, with top-up credits ordered direct from a bank account, via the phone.

Motorola is trying to use the phone as a means of paying for goods and services at a physical location with its M-Wallet, a radio-enabled chip inside a phone that communicates with in-store point of sale systems.

This could be used as a substitute for a physical credit card, which would still bill goods to your credit card account, explains Navin Mehta, Motorola’s vice-president of applications management.

But the M-Wallet, now undergoing trials, would require retailers to upgrade their point of sale terminals, raising the cost.

In time, the phone could become a useful device for co-ordinating transactions that are resolved using other payment methods such as credit cards.

If that happens, the credit card companies and the retailers will be happy because they will have another channel with which to do business. And the mobile phone companies should be happy because the phone will become an even more integral part of people’s lives.

Copyright The Financial Times Limited 2019. All rights reserved.

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